nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒04‒11
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. The ACA: Some Unpleasant Welfare Arithmetic By Casey B. Mulligan
  2. Is the 2010 Affordable Care Act Minimum Standard to Identify Disability in All National Datasets Good Enough for Policy Purposes? By Richard V. Burkhauser; T. Lynn Fisher; Andrew J. Houtenville; Jennifer R. Tennant
  3. Does Labor Legislation Benefit Workers? Well-Being after an Hours Reduction By Hamermesh, Daniel S.; Kawaguchi, Daiji; Lee, Jungmin
  4. The Impact of Vocational Training for the Unemployed: Experimental Evidence from Turkey By Hirshleifer, Sarojini; McKenzie, David; Almeida, Rita K.; Ridao-Cano, Cristobal
  5. Why is Old Workers' Labor Market More Volatile? Unemployment Fluctuations over the Life-Cycle By Hairault, Jean-Olivier; Langot, François; Sopraseuth, Thepthida
  6. The Role of Coresidency with Adult Children in the Labor Force Participation Decisions of Older Men and Women in China By Connelly, Rachel; Maurer-Fazio, Margaret; Zhang, Dandan
  7. An Empirical Model of Wage Dispersion with Sorting By Jesper Bagger; Rasmus Lentz
  8. Firm Knowledge, Neighborhood Diversity and Innovation By Wixe, Sofia
  9. Explaining Educational Attainment across Countries and over Time By Diego Restuccia; Guillaume Vandenbroucke
  10. Job Tasks, Computer Use, and the Decreasing Part-Time Pay Penalty for Women in the UK By Elsayed, Ahmed; de Grip, Andries; Fouarge, Didier
  11. Returns to Citizenship? Evidence from Germany's Recent Immigration Reforms By Gathmann, Christina; Keller, Nicolas
  12. Which Peers Matter? The Relative Impacts of Collaborators, Colleagues, and Competitors By George J. Borjas; Kirk B. Doran
  13. Knowing that You Matter, Matters! The Interplay of Meaning, Monetary Incentives, and Worker Recognition By Kosfeld, Michael; Neckermann, Susanne; Yang, Xiaolan
  14. Opportunity Cost and the Incidence of a Draft Lottery By Bingley, Paul; Lundborg, Petter; Vincent Lyk-Jensen, Stéphanie
  16. An Examination of Racial Discrimination in the Labor Market for Recent College Graduates: Estimates from the Field By John M. Nunley; Adam Pugh; Nicholas Romero; Richard Alan Seals, Jr.
  17. Attention Discrimination: Theory and Field Experiments with Monitoring Information Acquisition By Bartos, Vojtech; Bauer, Michal; Chytilová, Julie; Matejka, Filip
  18. From Micro Data to Causality: Forty Years of Empirical Labor Economics By van der Klaauw, Bas
  19. Matching Methods in Practice: Three Examples By Imbens, Guido W.

  1. By: Casey B. Mulligan
    Abstract: Under the Affordable Care Act, between six and eleven million workers would increase their disposable income by cutting their weekly work hours. About half of them would primarily do so by making themselves eligible for the ACA's federal assistance with health insurance premiums and out-of-pocket health costs, despite the fact that subsidized workers are not able to pay health premiums with pre-tax dollars. The remainder would do so primarily by relieving their employers from penalties, or the threat of penalties, pursuant to the ACA's employer mandate. Women, especially those who are not married, are more likely than men to have their short-term financial reward to full-time work eliminated by the ACA. Additional workers, beyond the six to eleven million, could increase their disposable income by using reduced hours to climb one of the "cliffs" that are part of the ACA's mapping from household income to federal assistance.
    JEL: E24 H21 I38
    Date: 2014–03
  2. By: Richard V. Burkhauser (Cornell University and University of Melbourne); T. Lynn Fisher (Social Security Administration); Andrew J. Houtenville (University of New Hampshire); Jennifer R. Tennant (Ithaca College)
    Abstract: Using linked 2009 Current Population Survey (CPS)-Annual Social and Economic Supplement/Social Security Administration records data and a definition of disability based on the six-question disability sequence (6QS) in the CPS-Basic Monthly Survey, we perform a face validity test that shows that the 6QS captures only 66.3 percent of those who administrative records confirm are receiving Social Security benefits based on their disability. Adding a work-activity question to the 6QS increases our capture rate by another 23.1 percentage points for a total of 89.3 percent. We find little difference in the distribution of conditions between those who only report a 6QS-based disability and those who only report a work activity-based disability. The four function-related questions in the 6QS do a relatively good job of capturing those receiving benefits based on these conditions. But the work-activity question does a far better job of capturing those receiving benefits than the two activity-related questions in the 6QS.
    Date: 2014–03
  3. By: Hamermesh, Daniel S. (University of Texas at Austin, Royal Holloway); Kawaguchi, Daiji (Hitotsubashi University); Lee, Jungmin (Sogang University)
    Abstract: Are workers in modern economies working "too hard" – would they be better off if an equilibrium with fewer work hours were achieved? We examine changes in life satisfaction of Japanese and Koreans over a period when hours of work were cut exogenously because employers suddenly faced an overtime penalty that had become effective with fewer weekly hours per worker. Using repeated cross sections we show that life satisfaction in both countries may have increased relatively among those workers most likely to have been affected by the legislation. The same finding is produced using Korean longitudinal data. In a household model estimated over the Korean cross-section data we find some weak evidence that a reduction in the husband's work hours increased his wife's well-being. Overall these results are consistent with the claim that legislated reductions in work hours can increase workers' happiness.
    Keywords: happiness, overtime work, rat-race
    JEL: J22 J23 J28
    Date: 2014–03
  4. By: Hirshleifer, Sarojini (University of California, San Diego); McKenzie, David (World Bank); Almeida, Rita K. (World Bank); Ridao-Cano, Cristobal (World Bank)
    Abstract: We use a randomized experiment to evaluate a large-scale active labor market policy: Turkey's vocational training programs for the unemployed. A detailed follow-up survey of a large sample with low attrition enables precise estimation of treatment impacts and their heterogeneity. The average impact of training on employment is positive, but close to zero and statistically insignificant, which is much lower than either program officials or applicants expected. Over the first year after training we do find training to have had statistically significant effects on the quality of employment, and that the positive impacts are stronger when training is offered by private providers. However, longer-term administrative data shows that after three years these effects have also dissipated.
    Keywords: vocational training, active labor market programs, randomized experiment, private provision
    JEL: I28 J24 J68 O12 C93
    Date: 2014–03
  5. By: Hairault, Jean-Olivier (University of Paris 1 Panthéon-Sorbonne); Langot, François (University of Le Mans); Sopraseuth, Thepthida (University of Cergy-Pontoise)
    Abstract: Since the last recession, it is usually argued that older workers are less affected by the economic downturn because their unemployment rate rose less than the one of prime-age workers. This view is a myth: older workers are more sensitive to the business cycle. We document volatilities of worker flows and hourly wage across age groups on CPS data. We find that old worker's job flows are characterized by a higher responsiveness to business cycles than their younger counterparts. In contrast, their wage cyclicality is lower than prime-age workers'. Beyond this empirical contribution, we show that a life-cycle Mortensen & Pissarides (1994) model is well suited to explain these facts: older workers' shorter work-life expectancy endogenously reduces their outside options and leads their wages to be less sensitive to the business cycle. Thus, in a market where wage adjustments are small, quantities vary a lot: this is the case for older workers, whereas the youngest behave like infinitively-lived agents. Our theoretical results point out that Shimer (2005)'s view on the MP model is consistent with prime-age workers' labor market while aging endogenously introduces real wage rigidities, allowing to match what we observe for old workers, without specific assumptions as in Hagendorn & Manovskii (2008).
    Keywords: search, matching, business cycle, life-cycle
    JEL: E32 J11 J23
    Date: 2014–03
  6. By: Connelly, Rachel (Bowdoin College); Maurer-Fazio, Margaret (Bates College); Zhang, Dandan (Peking University)
    Abstract: Over the course of China's economic reforms, a pronounced divergence in the labor force participation patterns of rural and urban elders emerged – rural elders increased their rates of participation while urban elders reduced theirs. In this project, based on the data of the Chinese population censuses of 1982 and 2000, we employ a two-stage procedure to take into account the endogeneity of the residency and labor force participation decisions of older persons. We find that the effect of coresidency with adult children on the labor force participation of older adult differs by urban vs. rural residence. In 1982, the LFPR of urban elders who coresided with their adult children were significantly higher than those who did not coreside. By 2000, this effect completely disappeared. In contrast, in rural areas, coresidency with adult children had a large and significant negative effect on the labor force participation of both male and female elders. This effect diminished only slightly over the reform period. Finally, we decompose the changes over time in elders' labor force participation decisions and find that the response effect for all groups (male and female, urban and rural) is positive, such that, holding the levels of demographic and economic variables constant, each group of elders would have had higher rates of participation in 2000 than in 1982. The remarkable divergence in urban and rural elders' labor force participation trends are due to differences in the relative sizes of their attribute and response effects.
    Keywords: labor force participation, elders, China, retirement, coresidency, rural and urban, living arrangements
    JEL: J14 J26 J11 J12 J13 J16 J22 O15 O53 P23 R23
    Date: 2014–03
  7. By: Jesper Bagger (Royal Holloway, University of London); Rasmus Lentz (University of Wisconsin-Maddison)
    Abstract: This paper studies wage dispersion in an equilibrium on-the-job-search model with endogenous search intensity. Workers differ in their permanent skill level and firms differ with respect to productivity. Positive (negative) sorting results if the match production function is supermodular (submodular). The model is estimated on Danish matched employer-employee data. We find evidence of positive assortative matching. In the estimated equilibrium match distribution, the correlation between worker skill and firm productivity is 0.12. The assortative matching has a substantial impact on wage dispersion. We decompose wage variation into four sources: Worker heterogeneity, firm heterogeneity, frictions, and sorting. Worker heterogeneity contributes 51% of the variation, firm heterogeneity contributes 11%, frictions 23%, and finally sorting contributes 15%. We measure the output loss due to mismatch by asking how much greater output would be if the estimated population of matches were perfectly positively assorted. In this case, output would increase by 7.7%.
    Keywords: Sorting, Worker heterogeneity, Firm heterogeneity, On-the-job search, Wage dispersion, Matched employer-employee data
    JEL: J24 J33 J62 J63 J64
    Date: 2014–04–01
  8. By: Wixe, Sofia (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School,)
    Abstract: This paper tests the importance of firm level knowledge and neighborhood diversity, as a source for localized knowledge spillovers, on firms propensity to innovate. Diversity is measured in terms of industries as well as employee education and occupation, of which the results show a positive neighborhood effect from diversity in education. In addition, an added positive effect from neighborhood diversity in education is found for firms with a larger share of highly educated employees, which points to the importance of absorptive capacity. However, firm characteristics, such as the knowledge of the own employees, provide to be the strongest determinants for the innovativeness of firms.
    Keywords: Knowledge; neighborhood diversity; education; skills; innovation
    JEL: J21 J24 O31 R32
    Date: 2014–04–03
  9. By: Diego Restuccia; Guillaume Vandenbroucke
    Abstract: Consider the following facts. In 1950, the richest countries attained an average of 8 years of schooling whereas the poorest countries 1.3 years, a large 6-fold difference. By 2005, the difference in schooling declined to 2-fold because schooling increased faster in poor than in rich countries. What explains educational attainment differences across countries and their evolution over time? We consider an otherwise standard model of schooling featuring non-homothetic preferences and a labor supply margin to assess the quantitative contribution of productivity and life expectancy in explaining educational attainment. A calibrated version of the model accounts for 90 percent of the difference in schooling levels in 1950 between rich and poor countries and 71 percent of the faster increase in schooling over time in poor relative to rich countries. These results suggest an alternative view of the determinants of low education in developing countries that is based on low productivity.
    Keywords: schooling, productivity, life expectancy, labor supply.
    JEL: O1 O4 E24 J22 J24
    Date: 2014–03–28
  10. By: Elsayed, Ahmed (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University)
    Abstract: Using data from the UK Skills Surveys, we show that the part-time pay penalty for female workers within low- and medium-skilled occupations decreased significantly over the period 1997-2006. The convergence in computer use between part-time and full-time workers within these occupations explains a large share of the decrease in the part-time pay penalty. However, the lower part-time pay penalty is also related to lower wage returns to reading and writing which are performed more intensively by full-time workers. Conversely, the increasing returns to influencing has increased the part-time pay penalty despite the convergence in the influencing task input between part-time and full-time workers. The relative changes in the input and prices of computer use and job tasks together explain more than 50 percent of the decrease in the part-time pay penalty.
    Keywords: part-time work, pay penalty, job tasks, computer use
    JEL: J24 J31
    Date: 2014–03
  11. By: Gathmann, Christina (Heidelberg University); Keller, Nicolas (Alfred-Weber-Institut für Wirtschaftswissenschaften, Universität Heidelberg)
    Abstract: Immigrants in many countries have lower employment rates and lower earnings than natives. In this paper, we ask whether a more liberal access to citizenship can improve the economic integration of immigrants. Our analysis relies on two major immigration reforms in Germany, a country with a relatively weak record of immigrant assimilation. For identification, we exploit discontinuities in the reforms' eligibility rules. Between 1991 and 1999, adolescents could obtain citizenship after eight years of residency in Germany, while adults faced a 15-year residency requirement. Since 2000, all immigrants face an 8-year residency requirement. OLS estimates show a positive correlation between naturalization and labor market performance. Based on the eligibility rules, we find few returns of citizenship for men, but substantial returns for women. Returns are also larger for more recent immigrants, but essentially zero for traditional guest workers. Overall, liberalization of citizenship provides some benefits in the labor market but is unlikely to result in full economic and social integration of immigrants in the host country.
    Keywords: citizenship, assimilation, language, welfare, Germany
    JEL: J24 J31 J61
    Date: 2014–03
  12. By: George J. Borjas; Kirk B. Doran
    Abstract: Many economists believe knowledge production generates positive spillovers among knowledge producers. The available evidence, however, is mixed. We argue that spillovers can exist along three dimensions (idea, geographic, and collaboration space). To isolate the key channel through which knowledge spills over, we use a unique data set to examine the impact of a large post-1992 exodus of Soviet mathematicians on the output of the non-émigrés. Although the data reveal strong competitive effects in idea space, there is evidence of knowledge spillovers in collaboration space, when high-quality researchers directly engage with other researchers in the joint production of new knowledge.
    JEL: D83 J24 O31
    Date: 2014–03
  13. By: Kosfeld, Michael (Goethe University Frankfurt); Neckermann, Susanne (Erasmus University Rotterdam); Yang, Xiaolan (Zhejiang University)
    Abstract: We manipulate workers' perceived meaning of a job in a field experiment. Half of the workers are informed that their job is important, the other half are told that their job is of no relevance. Results show that workers exert more effort when meaning is high, corroborating previous findings on the relationship between meaning and work effort. We then compare the effect of meaning to the effect of monetary incentives and of worker recognition via symbolic awards. We also look at interaction effects. While meaning outperforms monetary incentives, the latter have a robust positive effect on performance that is independent of meaning. In contrast, meaning and recognition have largely similar effects but interact negatively. Our results are in line with image-reward theory (Bénabou and Tirole 2006) and suggest that meaning and worker recognition operate via the same channel, namely image seeking.
    Keywords: meaning, monetary incentives, worker recognition, field experiment
    JEL: C93 J33 M12 M52
    Date: 2014–03
  14. By: Bingley, Paul (The Danish National Centre for Social Research – SFI); Lundborg, Petter (Department of Economics, Lund University); Vincent Lyk-Jensen, Stéphanie (The Danish National Centre for Social Research – SFI)
    Abstract: Military conscription implicitly taxes draftees. Those who would have volunteered at the market wage may be forced to serve for lower wages, and those with higher opportunity costs may be forced to serve regardless, yet little is known about the distribution of this burden. We exploit the Danish draft lottery to estimate the causal effect of military service on labor earnings of young men across the cognitive ability distribution. We find that high ability men who are induced to serve face a 7 percent earnings penalty, whereas low ability men face none. Educational career disruption is an important channel.
    Keywords: conscription; military service; earnings; draft lottery
    JEL: J24 J31 J45
    Date: 2014–03–21
  15. By: Cindy Truong, Yan Wendy Wu (LCERPA)
    Abstract: This paper studies the impact of female executives on the performance and risk taking of US banks. With a sample of US banks from 2002 to 2010, we find that the inclusion of female executives increases bank performance after addressing endogeneity and reverse causality issues. We also provide evidence that female executives decrease the risk taking of banks. These results suggest that there is added value to having female executives on the executive team. We also find that a more balanced gender ratio results in a greater impact on bank performance and risk taking. This supports the argument to increase gender diversity in executive level positions for females.
    Keywords: Gender, Bank Executive, Diversity
    JEL: G21 G28 J16 J48
    Date: 2014–03–01
  16. By: John M. Nunley; Adam Pugh; Nicholas Romero; Richard Alan Seals, Jr.
    Abstract: We present experimental evidence from a correspondence test of racial discrimination in the labor market for recent college graduates. Online job advertisements were answered with over 9,000 résumé s from fictitious, recently-graduated job seekers. We find strong evidence of differential treatment by race: black applicants receive approximately 14 percent fewer interview requests than their otherwise identical white counterparts. The racial gap in employment opportunities increases as perceived productivity characteristics are added, which is difficult to reconcile with models of statistical discrimination. We investigate different channels through which the observed racial differences might occur and conclude that taste-based discrimination at the race-skill level is the most likely explanation. The racial differences identified operate primarily through customer-level discrimination.
    Keywords: Racial Discrimination; Employment; Productivity; Field Experiments; Correspondence Studies
    JEL: J23 J24 J71
    Date: 2014–04
  17. By: Bartos, Vojtech (CERGE-EI); Bauer, Michal (Charles University, Prague); Chytilová, Julie (Charles University, Prague); Matejka, Filip (CERGE-EI)
    Abstract: We link two important ideas: attention is scarce and lack of information about an individual drives discrimination in selection decisions. Our model of allocation of costly attention implies that applicants from negatively stereotyped groups face "attention discrimination": less attention in highly selective cherry-picking markets, where more attention helps applicants, and more attention in lemon-dropping markets, where it harms them. To test the prediction, we integrate tools to monitor information acquisition into correspondence field experiments. In both countries we study we find that unfavorable signals, minority names, or unemployment, systematically reduce employers' efforts to inspect resumes. Also consistent with the model, in the rental housing market, which is much less selective than labor markets, we find landlords acquire more information about minority relative to majority applicants. We discuss implications of endogenous attention for magnitude and persistence of discrimination in selection decisions, returns to human capital and, potentially, for policy.
    Keywords: discrimination, attention, field experiment, monitoring information acquisition
    JEL: C93 D83 J15 J71
    Date: 2014–03
  18. By: van der Klaauw, Bas (VU University Amsterdam)
    Abstract: This overview describes the development of methods for empirical research in the field of labor economics during the past four decades. This period is characterized by the use of micro data to answer policy relevant research question. Prominent in the literature is the search for exogenous variation in treatment assignment which can be exploited to estimate causal effects. With the increased availability of detailed administrative data empirical labor economics and more generally empirical microeconomics will become an even more prominent field in economics research.
    Keywords: treatment effects, endogeneity, selection, experiments, labor market behavior, microeconometrics
    JEL: C21 C26 C93 J68
    Date: 2014–03
  19. By: Imbens, Guido W. (Stanford University)
    Abstract: There is a large theoretical literature on methods for estimating causal effects under unconfoundedness, exogeneity, or selection-on-observables type assumptions using matching or propensity score methods. Much of this literature is highly technical and has not made inroads into empirical practice where many researchers continue to use simple methods such as ordinary least squares regression even in settings where those methods do not have attractive properties. In this paper I discuss some of the lessons for practice from the theoretical literature, and provide detailed recommendations on what to do. I illustrate the recommendations with three detailed applications.
    Keywords: matching methods, propensity score methods, causality, unconfoundedness, potential outcomes, selection on observables
    JEL: C01 C14 C21 C52
    Date: 2014–03

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